The Evolution of the Cloud - How We Got Here

The Application Cloud did not arrive as a fully formed concept, birthed directly from the brain of Marc Benioff. No, there were definite named precursors to the Cloud.

In my view, the evolution of the Cloud occurred like this: The Internet, ASP, SAAS, then the Cloud.

In the Beginning was the Internet, and the Internet brought information from Everywhere to the browser on the desktop of Everybody. And Microsoft won the browser war, which helped to standardize the browser platform, and make it possible for applications, not just information, to run in the Internet Browser. And the Browser was good.

Then there was ASP – Application Service Providers. These were the original vendors of “Web Based Applications”, which were pioneered by software vendors who were the first to have this insight: If the users could access the application through a web browser, the back end of the application could be anywhere, and not necessarily on the customer site.

Many early ASP vendors took their Box-on-site systems, put a Browser interface on them, and hosted them for their customers. But in many cases, the licensing business model was the same.

Then there was SAAS – Software as a Service. SAAS differed from ASP in two primary ways: One technical and one business/sales.

On the Technical side, SAAS applications are characterized by “multi-tenantcy” – that is, a single logical data structure that contains multiple companies’ data. In Salesforce for instance, your Support case record might be physically adjacent to the Support Case record of a company across the country. And you don’t care, because the application presents the data to you as if you were the only user in the data base.

Multi-tenantcy mainly benefits the Vendor, as costs are reduced, and release cycles speed up, which results in faster growth in application functionality and configurability. But when these improvements in cost structure and application capability are passed on to the customer, what results is better value for the customer. And great value for the customer is one of the hallmarks of the Cloud.

The other innovation in SAAS is a business or sales innovation – the selling of software as a service. The traditional software sales model is a licensing model which is front-loaded with large licensing fees from the customer day one, and a residual “maintenance charge” covering upgrades and support.

This up-front fee has the effect of moving the risk to the Customer, who must buy before he knows the customization and implementation is successful, or how much it will cost.

The SAAS business innovation was to license the application on an ongoing service basis, per year, per user, with no big up-front licensing fees. This had three powerful effects on the mechanics of marketing and selling software:

More affordable – the application was cheaper, with no large financial commitment up front;

Reduced risk – because the big up-front commitment was eliminated, the risk for customers in investing in a new application was reduced;

More entry points – because cost and risk was reduced, no longer was software application purchase a Central IT decision. The manager in the White Plains office could and did decide to spend $500/month for ten seats and see how it went. So the software vendor had more entry points into the organization, and could use lower cost inside sales models to sell the product.

In many ways, the characteristics of the leading Cloud Application Vendors like Salesforce were established in the SAAS era, six or seven years ago.

So, what fundamental shifts created the current Cloud era?

I think that there are several distinguishing characteristics of the Cloud era, and I’ll detail them in the next post.

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Follow Larry Cone on his journey into the Cloud. Join this experienced participant in the software product and development scene ...
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Follow Larry Cone on his journey into the Cloud. Join this experienced participant in the software product and development scene as he peers through the overcast and lets the sunshine in. Larry comments on the Cloud environment, the players and participants, and the tools and techniques that will propel adoption of Cloud Computing, and change the IT landscape into a cloudscape.
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